Internet stocks lose momentum 1-05-98

StephanieO'Brien

NEW YORK (CBS.MW) -- Internet stocks were mixed Tuesday after investors poured money into large technology stocks, especially computer hardware and semiconductor shares.

Wall Street analysts also said Internet stocks' expensive valuations can't be sustained. And a sales report from Amazon.com might have provided a dose of reality about corporate profits -- one that could spell bad news for smaller online retailers.

"Internet stocks [have run up] because of online avarice," said Rick Berry, a technical analyst at J.P. Turner & Co. in Atlanta. "We're now starting to see a decline that will be even more substantive as the first quarter unfolds," Berry said.

Amazon.com (AMZN)
AMZN, +2.01%
said fourth-quarter sales more than tripled to about $250 million. Yet the online bookseller also cautioned investors that the higher seasonal sales "will not translate into correspondingly lower net losses in the fourth quarter."

The company's chief financial officer, Joy Covey, said "aggressive product pricing" and other factors held down profit margins. See story.

In other news, America Online and CBS (CBS)
CBS, -1.32%
on Tuesday unveiled an alliance that makes CBS.com a provider of news stories and broadcasts on AOL. America Online (AOL)
aol
shares, which rose 552 percent in 1998, fell 1.3 percent, or 1 7/8, to 146 15/16. See story.

Most Internet stocks are so overvalued that a steep drop is inevitable and may have begun, Berry, the analyst, said. He sees Yahoo! falling to 175 a share, America Online down at 102 and Amazon.com dipping to 75 a share within the first quarter.

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